31 January 2014

Reduce GHGs or Increase Energy Access?

At the Center for Global Development Todd Moss and Ben Leo have a provocative analysis up about an obscure but consequential decision facing the US Congress. It has to do with a little-known US government agency called the Overseas Private Investment Corporation. Moss and Leo explain:

President Obama’s Power Africa initiative, launched in June 2013, aims to increase electricity generation and access to modern energy services in six low-income countries. The success or failure of this effort will be determined in large part by the investment decisions of a dozen or so US government agencies that may be operating under potentially conflicting mandates. The Overseas Private Investment Corporation (OPIC), the main US development finance institution, will play a central role. How it selects projects will affect outcomes in Africa for the Power Africa initiative and OPIC’s activities in other low-income countries.

What is the issue here? In a nutshell it is whether OPIC will be allowed by the US Congress and Obama Administration to invest in fossil energy in low income countries. Moss and Leo explain:

There has been a general bias toward using OPIC to invest principally in solar, wind, and other low-emissions energy projects as part of the administration’s effort to promote clean energy technology. An explicit policy capping the total greenhouse gas emissions in OPIC’s overall portfolio has further pushed the organization’s investments heavily toward renewables. Indeed, over the past five years, OPIC has invested in more than 40 new energy projects and all but two (in Jordan and Togo) are in renewables.

The graph at the top of this post illustrates the trade-offs here. they are stark and consequential. The CGD analysis shows that a $10 billion OPIC portfolio focused on 100% off-grid renewables would provide energy access to 70 million less people than if that portfolio was 100% natural gas. The graph shows how a mix of renewables and gas translates into energy access.

There are three positions one might take with respect to the GHG vs. energy access tradeoffs involve with OPIC decision making.

1. Preventing GHG emissions is more important than securing energy access for poor people.
2. Securing energy access for poor people is more important than preventing GHG emissions.
3. The trade-off is an illusion as both goals can be achieved at the same time.

The first 2 positions are legitimate and defensible. The third is not, however it is a convenient refuge for those who wish to avoid the uncomfortable nature of the tradeoff.

Here is an additional bit of context. The US consumes a massive amount of natural gas. It is not even worth comparing US consumption to that of the six poor countries of Power Africa. However, here is an interesting bit of trivia: The amount of natural gas flared in the US (that is, wasted), is equal to the total combined consumption of Yemen, Tanzania, Ghana, Angola, Mozambique, Kyrgyzstan, Cameroon, Afghanistan, New Guinea, Gabon and Senegal (sources: here and here).

A debate over OPIC is one worth having: Should US greenhouse gas policy extend to trading off energy access for preventing emissions?

It is a simple choice, and one with enormous consequences. And make no mistake, a choice will be made.

As I wrote in The Climate Fix, the only way to turn this trade-off into a win-win situation is via a long-term commitment to energy innovation that makes clean energy cheaper. Meantime, in the near term it is simply immoral to ask the poor to make energy access sacrifices while we consume massive amounts of energy, based almost entirely on fossil fuels. Climate policy should not be used to keep poor people poor.